ANALYSIS

23 SEPTEMBER, 2020

The Macroeconomic Consequences:
Trump vs. Biden

Prepared byMark Zandi
Mark.Zandi@moodys.com
Chief Economist
Bernard Yaros
Bernard.YarosJr@moodys.com
Economist

INTRODUCTION
In this analysis we assess the macroeconomic consequences of the economic policies proposedby the presidential candidates. During their campaigns, President Trump and Vice President
Biden have put forward a wide range of proposals to change the tax code, government spending,and other economic policies.

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MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

1

The Macroeconomic Consequences:
Trump vs. Biden1
BY MARK ZANDI AND BERNARD YAROS2I

n this analysis we assess the macroeconomic consequences of the economic policies proposed by thepresidential candidates. During their campaigns, President Trump and Vice President Biden have put forward awide range of proposals to change the tax code, government spending, and other economic policies.

We consider four scenarios. The most
likely, or baseline, scenario (40% probability)
assumes Biden wins the presidency but willneed to negotiate with a skeptical Senatethat remains under Republican control, while
the House remains Democratic (see Chart 1).3
The Current Policy Scenario (35% probability) is consistent with Trump being re-elected
to a second term, the Senate remaining under Republican control, and the House under
Democratic control. This would maintain thestatus quo and policies that are currently inplace. The third, less likely Democratic Sweep
Scenario (20% probability) assumes Biden
and the Democrats sweep the presidency andCongress and fully implement the economic
agenda Biden has explicitly outlined in his
speeches and interviews and on his campaign’s website.4 Finally, we consider a muchless likely Republican Sweep Scenario (5%probability) in which Trump is re-elected andthe Republicans sweep Congress and fully
adopt the policies Trump espouses as gleaned
from his administration’s most recent budget
and his speeches and campaign website.
We use the Moody’s Analytics5 model of
the U.S. and global economy for this analysis.6 The model is similar to those used by
the Federal Reserve Board and Congressional
Budget Office for forecasting, budgeting andpolicy analysis. The Moody’s Analytics model has been used to evaluate the plethora offiscal and monetary policies implemented
during the financial crisis and COVID-19
pandemic, and many of the economic poliMOODY’S ANALYTICS

cies proposed by presidential candidates inother elections.7
Quantifying the economic impact of
Trump’s policies is complicated by their lack oftransparency and specificity. This requires us tomake more assumptions regarding their designand size. Evaluating Biden’s policies is complicated by the wide range of his proposals. Someare familiar and we have already modeled andanalyzed them, including some of his plans fortax increases, infrastructure spending, and theminimum wage. However, some of his otherproposals are more novel, such as for eldercare and clean energy infrastructure. Someeconomic policies that have come up during
the campaign are not included in this analysis,
most notable being regulatory and anti-trust
policies. While these policies may have significant impacts on specific industries or compa-

nies, they are not expected to have meaningfulmacroeconomic impacts.8
To determine the longer-term economic
impact of the candidates’ policy proposals,
the Moody’s Analytics macroeconomic model
is simulated over the decade through 2030.
This is consistent with the Congressional
Budget Office’s horizon for the federal government’s budget and policy analysis. The
assumption is that the candidates’ policies
are implemented soon after they take officein January and do not change through theremainder of the decade. That is, no othersignificant fiscal policy changes are legislated. Monetary policy is determined in themodel based on the Federal Reserve Board’s
newly announced framework for conducting monetary policy, in which the Fed has
committed not to begin normalizing interest

Chart 1: 2020 Election Scenarios
Ordered from most to least likely

3

4

Biden +
Republican Senate
Democratic House

Trump +
Republican Senate
Democratic House

Biden +
Democratic Senate
Democratic House

Trump +
Republican Senate
Republican House

40% probability

35% probability

20% probability

5% probability

It would be challenging for
Biden and Democrats toimplement an agenda.
We would see continued
use of executive orders
as well as continued
congressional stagnation.

Status quo - we would
see more of the same.

Biden’s agenda and broader
Democratic agenda would
have more steam, but thefilibuster rule would limit
their reach. Moderate
Democrats would gain power
as their vote would be essential
for passage.

Trump’s aggressive
tax cut and deregulatory policy
agenda would be reinvigorated. The
filibuster rule would be
the only constraint
although this would bein jeopardy.

1Some chance legislationthat includes both deficitfinanced government
spending increases and tax
cuts would get through.

The Macroeconomic Consequences: Trump vs. Biden

2

President Trump would
continue to confront
China and other trading
partners through higher
tariffs and other tradeand investment
restrictions.
Trump would also
double-down on his
restrictive foreign
immigration policy.

Filibuster rule remains in placewith exceptions including
budget reconciliation process(used for 2017 tax bill andAffordable care Act) and somejudicial and otherappointments.

2

September 20201

Table 1: Economic Outlook Under Democratic Sweep Scenario
2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

20202024

20202030

Real GDP$ tril% Change

18,148.8 18,914.3 20,366.8 21,040.7 21,427.5 21,757.1 22,162.0 22,644.2 23,116.8 23,585.0 24,075.6
-4.9
4.2
7.7
3.3
1.8
1.5
1.9
2.2
2.1
2.0
2.1

Nonfarm employment
Mil
Change, ths

141.3-9,648.1

142.6
1,282.3150.8
8,220.5

155.7
4,878.2

157.7
2,073.1

158.7
922.8

159.5
864.2

160.6
1,033.0

161.3
768.3

162.1
769.0

163.0
925.8

Unemployment rate, %

9.1

8.3

5.2

4.1

4.1

4.2

4.3

4.2

4.3

4.3

4.3

Avg
5.4

4.7

Labor force participation rate, %

61.9

62.1

62.6

63.3

63.6

63.7

63.7

63.6

63.6

63.5

63.4

62.9

63.3

Real disposable income
2012$ ths
% change

124.5
5.8

117.7
-5.5

121.4
3.2

125.5
3.4

126.6
0.9

127.7
0.9

128.9
0.9

130.5
1.3

132.5
1.5

134.5
1.5

136.6
1.5

Homeownership rate, %

66.5

65.4

65.6

65.9

66.3

66.5

66.6

66.7

66.8

66.8

66.8

S&P Stock Price Index
Index% change

2,946.0
1.2

2,932.5-0.5

3,090.4
5.4

3,215.4
4.0

3,424.5
6.5

3,662.8
7.0

3,838.5
4.8

4,009.5
4.5

4,167.0
3.9

4,313.0
3.5

4,466.1
3.6

Corporate profits$ bil% change

1,995.8-11.3

2,347.7
17.6

2,576.5
9.7

2,688.2
4.3

2,775.5
3.2

2,867.1
3.3

2,965.5
3.4

3,076.6
3.7

3,190.7
3.7

3,304.3
3.6

3,418.3
3.5

Federal funds rate, %

0.4

0.1

0.1

0.5

1.5

2.4

2.6

2.7

2.7

2.6

10-yr Treasury yield, %

0.8

1.1

2.1

3.0

3.7

4.1

4.4

4.5

4.5

4.4

100.1

109.6

112.0

116.0

119.1

121.1

123.1

124.6

126.2

127.9

Change
16.5
21.7

Avg annual growth
0.4
0.9
Avg
65.8

66.4

Avg annual growth
3.8
4.2

8.6

5.5

2.5

Avg
0.5

1.8

4.4

2.5

3.6

Static federal budget deficit, CY , $ bil -3,939.0 -3,281.6 -2,813.7 -2,017.6 -1,862.0 -1,884.4 -1,964.6 -2,073.5 -2,168.0 -2,265.5 -2,351.8
Federal debt-to-GDP ratio, CY , %Avg annual growth
4.2
2.9

129.7

-2,493.7 -2,268.3
114.2

120.9

Sources: BEA, BLS, Census Bureau, Treasury, Moody’s Analytics

rates until the economy is at full employment
and inflation has been consistently above theFed’s 2% inflation target. All of the scenarios
assume that the worst of the COVID-19 crisis
and its economic fallout are over, and thatthe pandemic will wind down with an effective and widely distributed vaccine beginningsoon after the next president is sworn in.9

Democratic Sweep Scenario
The economic outlook is strongest under the scenario in which Biden and the
Democrats sweep Congress and fully adopt
their economic agenda. In this scenario, theeconomy is expected to create 18.6 million
jobs during Biden’s term as president, and theeconomy returns to full employment, with
MOODY’S ANALYTICS

unemployment of just over 4%, by the second half of 2022 (see Table 1). During Biden’spresidency, the average American household’s real after-tax income increases by approximately $4,800, and the homeownershiprate and house prices increase modestly.
Stock prices also rise, but the gains are limited. This is because of high current market
valuations that limit prospects for near-term
gains and the pedestrian growth in corporate
profits under Biden’s policies, as more of thebenefits from the stronger economy under
his policies go to workers.
Near-term economic growth is lifted by
Biden’s aggressive government spendingplans, which are deficit-financed in significant part. Stronger anticipated global trade

The Macroeconomic Consequences: Trump vs. Bidenand foreign immigration also contribute (seeTable 2). His proposal calls for additional
spending of $7.3 trillion over the next decade
on a static basis on infrastructure, education,and the social safety net including everythingfrom Social Security to housing and healthcare. The bulk of the spending is slated tohappen during his term as president in aneffort to generate more jobs to return theeconomy to full employment as quickly as
possible (see Appendix: Biden’s Fiscal Policies
in Detail).10
While Biden’s spending plans are financed
in part by higher taxes on corporations andthe well-to-do that come to $4.1 trillion overthe decade on a static basis, the net of thesecrosscurrents is to boost economic activity.
3

Table 2: Static Budget Score of Vice President Biden’s Economic Plan
FY, $ bil2021-2024

Cumulative2021-2030

Static budget deficit(2,505.9)(3,170.7)

Total government spending

3,947.6

7,269.9

Infrastructure
Transportation“Made in America”
Clean energy
Other structures

2,338.4
872.4
700.0
472.8
293.1

2,390.0
900.0
700.0
490.0
300.0

Education
Higher education
K-12
Student loan debt relief

636.3
366.9
159.7
109.8

1,906.4
1,006.5
600.0
299.9

Social safety net
Child and elderly care
Social Security
Labor provisions

367.8
256.5
63.4
47.8

1,498.5
1,025.0
328.6
144.9

Healthcare
Coverage expansion
Rural health & opioid crisis
Programmatic feedback
Health reforms

605.1
687.5
79.5
(122.4)(39.5)

1,475.0
1,900.0
325.0(350.0)(400.0)1,441.7
302.6
317.2
822.0

4,099.2
963.1
997.6
2,138.5

Total tax revenues
Individual taxes
Payroll taxes
Corporate taxes
Source: Moody’s Analytics

Greater government spending adds directly
to GDP and jobs, while the higher tax burden has an indirect impact through business
investment and the spending and saving
behavior of high-income households. Since
these households will not reduce their spending one-for-one in response to their higher
tax bills and will use their savings and otherfinancial resources, the near-term impact on
GDP and jobs is mitigated.
Longer-term growth under Biden’s policies
is also stronger because on net they expand
the supply side of the economy—the quantityand quality of labor and capital needed to
produce goods and services. His plan to increase spending on the nation’s infrastructure
also boosts business competitiveness andproductivity. His paid family leave and eldercare plans would increase labor force particiMOODY’S ANALYTICS

pation, which is approximately a percentage
point higher a decade from now as a result,while increased spending on higher educationand early childhood education would raise
the educational attainment of workers. Increased global trade and foreign immigration
would increase the size of the workforce,both skilled and unskilled, and support
stronger productivity.
These benefits to long-term growth willmore than offset the economic costs fromthe higher marginal corporate and personal tax rates under his plan that reduce the
incentives to save, invest and work, the disincentives to work and save from the larger
social benefits, and the higher federal minimum wage that would be phased in over along enough period to mitigate much of its
negative effects on jobs.11

The Macroeconomic Consequences: Trump vs. Biden

Biden’s economic proposals will result in
an increase in the federal government’s budget deficits and debt load, particularly early in
his administration. Under his proposals, thebudget deficit on a dynamic basis will be a
cumulative $2 trillion greater during his firstterm and $2.6 trillion over the decade. Publicly traded federal debt as a percent of GDP
will increase from 108% when he takes office
to 120% by the end of his term and 130% by
the end of the decade.
However, mitigating the macroeconomic
consequences of the larger budget deficits
are continued low interest rates. Interest
rates are the principal channel through whicha larger government debt load impacts the
economy. Biden as president would inherit
an economy with high unemployment thatis far from full employment, ensuring thatthrough much of his term the Federal Reserve
will maintain its zero interest rate policy andlong-term interest rates will remain low.
Moreover, as the economy returns to full
employment, government spending under
Biden’s policies abates, resulting in muchsmaller budget deficits later in the decade.
Low- and middle-income households are
the primary beneficiaries of Biden’s economic
proposals. Their tax bill will remain roughly
the same as it is today, but they are significant beneficiaries of increased government
spending on education, healthcare, housing,a plethora of other social programs, and alarger economy. High-income and wealthierhouseholds pay meaningfully more in taxes
under Biden’s policies, as do corporations.
This weighs on stock prices and dividend
income, the benefits of which largely accrue
to those in the top part of the income andwealth distribution.

Republican Sweep Scenario
The economic outlook is weakest under the
scenario in which Trump and the Republicans
sweep Congress and fully adopt their economic agenda. In this scenario, the economy
is expected to create 11.2 million jobs during
Trump’s second term as president, and it is
not until the first half of 2024 that the economy returns to full employment (see Table 3).
Given the lackluster growth coming out of the
COVID-19 crisis, unemployment remains persistently higher and the economy suffers some
hysteresis.12 Full employment is consistent
with an unemployment rate of just less than4

Table 3: Economic Outlook Under Republican Sweep Scenario
2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

20202024

20202030

Real GDP$ tril% change

18,148.8 18,678.2 19,396.6 20,025.3 20,488.4 20,869.0 21,260.6 21,690.1 22,105.9 22,532.0 22,960.0
-4.9
2.9
3.8
3.2
2.3
1.9
1.9
2.0
1.9
1.9
1.9

Nonfarm employment
Mil
Change, ths

141.3-9,648.1

141.9
565.9

145.0
3,123.7

148.7
3,718.6

150.5
1,855.8

151.1
598.0

151.8
668.1

152.5
649.2

152.9
445.7

153.5
634.7

154.2
681.7

Unemployment rate, %

9.1

8.5

7.1

5.4

4.8

4.9

4.9

5.0

5.0

5.0

4.9

Avg
6.4

5.6

Labor force participation rate, %

61.9

62.0

61.9

62.0

62.1

62.1

62.1

62.1

62.1

62.0

62.2

62.0

62.1

Real disposable income
2012$ ths
% change

124.5
5.8

118.2
-5.1

118.4
0.2

120.6
1.9

122.2
1.3

123.7
1.2

125.6
1.5

127.7
1.7

129.4
1.3

131.6
1.6

133.7
1.6

Homeownership rate, %

66.5

65.4

65.5

65.7

65.9

66.1

66.1

66.1

66.2

66.2

66.2

S&P Stock Price Index
Index% change

2,946.0
1.2

2,954.7
0.3

3,126.0
5.8

3,181.1
1.8

3,340.9
5.0

3,549.9
6.3

3,723.0
4.9

3,907.0
4.9

4,089.7
4.7

4,268.5
4.4

4,441.2
4.0

Corporate profits$ bil% change

1,995.8-11.3

2,313.5
16.0

2,453.4
6.0

2,517.7
2.6

2,621.2
4.1

2,746.2
4.8

2,866.0
4.4

2,983.5
4.1

3,106.5
4.1

3,229.3
4.0

3,351.7
3.8

Federal funds rate, %

0.4

0.1

0.1

0.1

0.7

1.7

2.5

2.6

2.6

2.5

10-yr Treasury yield, %

0.8

1.1

2.1

3.0

3.6

4.0

4.2

4.3

4.3

4.2

100.1

109.1

110.7

113.4

115.7

117.6

119.8

122.1

124.5

126.7

Change
9.3
12.9

Avg annual growth
-0.5
0.7
Avg
65.6

65.9

Avg annual growth
3.2
4.2

7.1

5.3

2.5

Avg
0.2

1.5

4.2

2.4

3.5

Static federal budget deficit, CY , $ bil -3,939.0 -2,581.4 -2,002.2 -1,843.9 -1,803.7 -1,875.1 -1,948.1 -2,149.4 -2,228.6 -2,306.8 -2,365.3
Federal debt-to-GDP ratio, CY , %Avg annual growth
3.1
2.4

129.1

-2,057.8 -2,110.4
112.3

118.9

Sources: BEA, BLS, Census Bureau, Treasury, Moody’s Analytics

5% and a labor force participation rate thatnever fully recovers to its pre-pandemic highs.
The softer labor market weighs on
wage growth, and the average Americanhousehold’s real after-tax income does notchange much during the president’s term.
The homeownership rate and house prices
increase modestly, and while stock prices
rise, the gains are limited given high current
market valuations and pedestrian growthin corporate profits due to the more slowly
growing economy.
Trump has proposed much less expansive
support to the economy from tax and spending policies, perhaps anticipating a strong socalled V-shape recovery from the downturncaused by the pandemic (see Table 4).13 On
MOODY’S ANALYTICS

taxes, he proposes to make permanent the
tax cuts for higher-income households andbusinesses that were part of his 2017 tax cuts
and which under current law are slated to
expire in the next few years. We also assume
that he provides workers with a temporary
break on their payroll taxes in keeping withthe spirit of his recent executive order to allow workers to suspend their payroll tax payments through the end of the year, although
under that order workers must pay the money back. The tax cuts in total cost $1.9 trillion
over the next decade on a static basis (seeAppendix: Trump’s Fiscal Policies in Detail).
On government spending, Trump proposes a sizable infrastructure plan costing $1
trillion over the decade, but this is more than

The Macroeconomic Consequences: Trump vs. Bidenoffset by spending cuts across a wide range
of nondefense programs. Healthcare, education and social welfare programs suffer thebiggest cuts. In total, the president proposes
to implement $740 billion in spending reductions over the decade.
The net of Trump’s proposed tax cuts andgovernment spending increases is a modest
increase in the government’s budget deficits,
totaling $250 billion during his first term and$1 trillion over the decade on a dynamic basis. The nation’s publicly traded debt increases from 108% when he takes office to 117%by the end of his second term and 130% by
the end of the decade.
The economy suffers in Trump’s second
term, as we expect he will double down on
5

Table 4: Static Budget Score of President Trump’s Economic Plan
FY, $ bil

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Cumulative2021- 20212024
2030

Static budget deficit(199.6)(37.7)(49.5)(47.3)(60.8)(111.4)(202.9)(182.4)(153.5)(108.0)(334.0) (1,153.2)

Total government spending
Infrastructure
Healthcare
Social safety net
Education
Other

3.6
65.2
(26.5)(26.4)
(7.2)
(1.6)

7.9
91.1
(51.3)(34.1)(12.2)
14.4

12.1
111.6
(62.8)(37.9)(15.6)
16.7

0.3
126.2
(77.2)(40.4)(17.3)
8.9(18.2)
125.9(90.4)(45.2)(18.1)
9.5(74.6)
112.0(106.2)(50.2)(18.7)(11.4)(105.9)109.3(114.3)(54.0)(19.5)(27.5)(137.5)
109.6(123.7)(60.0)(20.0)(43.4)(180.7)115.9(133.5)(65.2)(20.5)(77.4)(244.1)117.1(142.6)(71.7)(21.0)(125.9)23.9394.1(217.8)(138.7)(52.2)
38.4

Total tax revenues
Individual taxes
Payroll taxes
Corporate taxes(196.0)(23.7)(172.2)(0.0)(29.7)(27.5)
0.0(2.3)(37.4)(25.9)
0.0(11.5)(47.0)(26.0)
0.0(21.0)(79.0)(50.7)
0.0(28.3)(186.0)(153.0)0.0(33.0)(308.9)(274.6)0.0(34.3)(319.9)(292.4)0.0(27.5)(334.3)(311.8)0.0(22.4)(352.1)(332.0)0.0(20.1)(310.1) (1,890.3)(103.1) (1,517.6)(172.2) (172.2)(34.8) (200.5)(737.1)
1,084.0(928.4)(485.0)(170.0)(237.7)

Source: Moody’s Analytics

the foreign trade and immigration policies
he pursued in his first term. This means aresumption of the tariff war with China thatwas put on hold late last year with the socalled Phase One trade deal with that nation.
While the pandemic would have complicatedthe implementation of even the best designed trade deal, there is little evidence that
the Chinese had any intention to abide by thePhase One deal, other than where it was in
China’s economic interest, such as by importing more U.S. agricultural products. When the
dust settles after the pandemic, and it becomes clearer that Chinese behavior has notchanged appreciably, the tariff wars are likely
to heat up again. The significant increase intariffs during Trump’s first term—from an effective tariff rate of 1.5% when he took office
to a peak of more than 6% just prior to thePhase One deal—acted like a tax increase on
the U.S. economy, hurting U.S. manufacturers, transportation companies, and farmers
in particular. More of the same is expected in
Trump’s second term.
Tensions with other trading partners arealso likely to remain high. The small improvement in the U.S. and Chinese bilateral trade
deficit since the trade war began has been
offset by widening deficits between the U.S.
and other nations. Global manufacturers
have not meaningfully shifted production
back to the U.S. They have shifted instead toother countries with lower production costs.
MOODY’S ANALYTICS

Since Trump has focused his ire on nations
with which the U.S. runs trade deficits, helikely will not feel any less upset in his next
four years.
We also assume that Trump will continue
to pursue a highly restrictive foreign immigration policy. In the more than quarter-century prior to the Trump administration, net
immigration to the U.S. averaged close to
1 million per annum. In the president’s firstterm, immigration has sharply declined and isestimated at closer to 750,000 annually. This
number is assumed to weaken even further
to near 500,000 annually in this second termas fewer immigrants are able to come to the
U.S. and more of those already living in the
U.S. return to their native countries. This is asignificant impediment to longer-term economic growth, as it slows growth in both thelabor force, which is problematic given prospects for declines in the native working-age
population, and labor productivity.14

Split Congress Scenarios
While the Democratic and Republican
Sweep Scenarios bookend the possible election outcomes and resulting economic policies and impacts, it is much more likely thatneither Trump nor Biden will have the political luxury of having their party control boththe Senate and House. In our baseline scenario, Biden wins the presidency but is confronted by a Republican Senate, and in the

The Macroeconomic Consequences: Trump vs. Bidenmodestly less likely Current Policy Scenario,
Trump wins a second term but must continue
to grapple with a Democratic House.
In either scenario, it is difficult to see
the political path to big changes in tax andgovernment spending policies. Biden in thebaseline scenario may have some legislative
wiggle room using the budget reconciliation
process and possible horse trading with theRepublican Senate.15 Given prospects thatthe economy will still be struggling next
year in its recovery from the pandemic andless concern over budget deficits given the
Fed’s commitment to maintain its zero interest rate policy for some time, there may
be a way to strike a deal on more infrastructure and social spending in exchange forsome tax cuts targeted to middle-income
households. Trump in the Current Policy
Scenario may also find a similar legislative
way forward with the Democratic House.
Nonetheless, the assumption is that any
fiscal policy changes in these scenarios aremuch more modest.
With legislation difficult to achieve, policy
will continue to be made mostly by presidential executive order. Most significant, we
assume Trump will continue to use his executive authority to pursue his restrictive tradeand immigration policies, while Biden will use
this authority to unwind those policies. Biden
will continue to aggressively confront the
Chinese to abide by international trade laws,
6

Table 5: Economic Outlook Under Baseline Scenario
2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

20202024

20202030

Real GDP$ tril% change

18,148.8 18,615.2 19,581.1 20,336.5 20,822.8 21,231.7 21,629.3 22,059.7 22,527.7 22,994.1 23,467.0
-4.9
2.6
5.2
3.9
2.4
2.0
1.9
2.0
2.1
2.1
2.1

Nonfarm employment
Mil
Change, ths

141.3-9,648.1

141.4
0.1

146.1
4.7

150.7
4.6

152.9
2.1

153.7
0.8

154.4
0.7

155.1
0.7

155.8
0.8

156.7
0.9

157.7
1.0

Unemployment rate, %

9.1

8.8

6.6

4.8

4.5

4.7

4.8

4.9

4.9

4.8

4.7

Avg
6.2

5.3

Labor force participation rate, %

61.9

62.0

61.9

62.1

62.5

62.6

62.6

62.6

62.5

62.4

62.3

62.1

62.3

Real disposable income
2012$ ths
% change

124.5 14,920.2 15,330.4 15,870.6 16,263.5 16,592.2 16,887.2 17,208.6 17,622.1 18,059.8 18,498.4
5.8
-5.9
2.8
3.5
2.5
2.0
1.8
1.9
2.4
2.5
2.4

Homeownership rate, %

66.5

65.4

65.6

65.8

66.1

66.2

66.3

66.4

66.4

66.4

66.4

S&P Stock Price Index
Index% change

2,946.0
1.2

2,943.3-0.1

3,123.0
6.1

3,192.5
2.2

3,363.2
5.4

3,576.8
6.4

3,752.4
4.9

3,958.8
5.5

4,155.9
5.0

4,337.6
4.4

4,525.7
4.3

Corporate profits$ bil% change

1,995.8-11.3

2,346.8
17.6

2,530.3
7.8

2,618.5
3.5

2,732.4
4.4

2,858.0
4.6

2,978.5
4.2

3,096.0
4.0

3,218.6
4.0

3,343.9
3.9

3,471.5
3.8

Federal funds rate, %

0.4

0.1

0.1

0.5

1.5

2.4

2.6

2.7

2.7

2.6

10-yr Treasury yield, %

0.8

1.1

2.1

2.9

3.6

3.9

4.2

4.3

4.3

4.2

100.1

111.5

112.1

113.2

114.7

115.6

117.2

118.8

120.1

121.4

Change
11.6
16.4

Avg annual growth
238.1
64.9
Avg
65.7

66.1

Avg annual growth
3.4
4.4

8.2

5.7

2.5

Avg
0.5

1.8

4.1

2.4

3.5

Static federal budget deficit, CY , $ bil -3,939.0 -2,396.1 -1,895.8 -1,714.0 -1,694.3 -1,747.5 -1,770.7 -1,888.4 -1,982.8 -2,069.2 -2,151.0
Federal debt-to-GDP ratio, CY , %Avg annual growth
3.5
2.6

123.1

-1,925.0 -1,931.0
112.9

116.8

Sources: BEA, BLS, Census Bureau, Treasury, Moody’s Analytics

but we assume he does this by re-engaging
with the World Trade Organization and implementing other multinational strategies todeal with the Chinese. Biden has talked about
the possibility of recommitting to a modified
Trans-Pacific Partnership free trade agreement with tougher labor and environmental
provisions. The TPP was the deal between the
U.S. and other Pacific rim nations that excluded China, because China did not play fair.
The Obama administration had agreed to the
TPP, but Trump withdrew from it with one of
his first executive orders.
On foreign immigration, in the baseline weassume Biden would use his executive authority to return to the pre-Trump immigration policy that allows close to 1 million immigrants
MOODY’S ANALYTICS

into the U.S. each year. In the Current Policy
Scenario, Trump is assumed to maintain current immigration policy that allows 750,000
migrants into the country annually.
Under the baseline, the economy creates
13.6 million jobs during Biden’s term aspresident and returns to full employment
by summer 2023 (see Table 5). Meanwhile,
under the Current Policy Scenario, the economy during Trump’s second term creates 11.8
million jobs and returns to full employment
toward year’s end 2023 (see Table 6).

Trump vs. Biden
We expect only modest differences in enacted policy and the economic outlook with asplit Congress, regardless of who is president,

The Macroeconomic Consequences: Trump vs. Biden

but the differences seem likely to be meaningful if Trump or Biden win the presidencywith Congress under their party’s control. To
be sure, there is no prospect that all of their
proposals would get through the legislative
process and into law fully intact, and theirpolicies could quickly change on the other sideof the election depending on economic andpolitical circumstances. However, the proposals they have made during the campaign area statement on the candidates’ philosophiesand priorities. It is instructive to consider the
economic outlook if they were adopted intheir totality.
To this end, even allowing for some variability in the accuracy of the economic modeling and underlying assumptions that drive7Table 6: Economic Outlook Under Current Policy Scenario
2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

20202024

20202030

Real GDP$ tril% change

18,148.8 18,565.1 19,392.4 20,101.3 20,580.3 20,978.7 21,363.1 21,777.8 22,222.1 22,662.4 23,108.0
-4.9
2.3
4.5
3.7
2.4
1.9
1.8
1.9
2.0
2.0
2.0

Nonfarm employment
Mil
Change, ths

141.3-9,648.1

141.0-259.1144.8
3,820.7

149.1
4,243.3

151.1
2,001.8

151.8
745.1

152.5
645.3

153.1
571.3

153.7
622.0

154.4
735.9

155.2
815.1

Unemployment rate, %

9.1

8.9

7.1

5.2

4.7

4.8

4.9

4.9

4.9

4.8

4.7

Avg
6.5

5.5

Labor force participation rate, %

61.9

61.9

61.9

62.0

62.1

62.2

62.2

62.2

62.1

62.0

61.9

62.0

62.1

Real disposable income
2012$ ths
% change

124.5
5.8

116.5
-6.5

118.3
1.6

121.2
2.4

122.9
1.4

124.1
1.0

125.2
0.8

126.4
1.0

128.3
1.5

130.4
1.6

132.4
1.5

Homeownership rate, %

66.5

65.4

65.5

65.7

66.0

66.1

66.2

66.2

66.2

66.2

66.2

S&P Stock Price Index
Index% change

2,946.0
1.2

2,841.8-3.5

2,990.8
5.2

3,051.8
2.0

3,215.7
5.4

3,424.3
6.5

3,595.8
5.0

3,798.1
5.6

3,991.9
5.1

4,171.0
4.5

4,356.8
4.5

Corporate profits$ bil% change

1,995.8-11.3

2,321.8
16.4

2,481.6
6.9

2,560.9
3.2

2,674.8
4.4

2,803.9
4.8

2,925.0
4.3

3,042.1
4.0

3,162.6
4.0

3,285.2
3.9

3,410.2
3.8

Federal funds rate, %

0.4

0.1

0.1

0.5

1.4

2.4

2.6

2.6

2.6

2.5

10-yr Treasury yield, %

0.8

1.1

2.0

2.9

3.5

3.9

4.2

4.3

4.2

4.2

100.1

109.1

110.1

112.3

114.4

116.0

118.1

119.9

121.6

123.1

Change9.8
13.9

Avg annual growth
-0.3
0.6
Avg
65.7

66.0

Avg annual growth
2.2
4.0

7.6

5.5

2.5

Avg
0.5

1.7

4.1

2.4

3.4

Static federal budget deficit, CY , $ bil -3,939.0 -2,419.0 -1,978.2 -1,809.6 -1,775.7 -1,824.1 -1,847.6 -1,962.1 -2,059.4 -2,150.4 -2,237.4
Federal debt-to-GDP ratio, CY , %Avg annual growth
3.2
2.4

125.0

-1,995.6 -2,006.3
111.5

117.0

Sources: BEA, BLS, Census Bureau, Treasury, Moody’s Analytics

our analysis, we conclude that Biden’s economic proposals would result in a stronger
U.S. economy than Trump’s. Largely becauseof Biden’s substantially more expansive fiscal
policies, the economy would return to full
employment more quickly coming out of thepandemic than under Trump—in the second
half of 2022 under Biden compared withthe first half of 2024 under Trump. Biden’s
reversal of Trump’s policies on foreign tradeand immigration would also contribute tostronger economic growth, so that by theend of their terms in 2024, real GDP would
be $960 billion, or 4.5%, larger under Biden
than Trump (see Chart 2). This translates into
7.4 million more jobs under Biden than Trump(see Chart 3). Longer-run growth also reMOODY’S ANALYTICS

ceives more of a boost under Biden’s policies,
since they lift both labor force participationand productivity growth, though the effectis modest over the 10-year horizon of theanalysis. It takes longer for Biden’s focus on
educational attainment, clean energy andother infrastructure, elder care, and paid family leave to have a significant impact on theeconomy’s long-run growth potential. And
Biden’s increase in corporate tax rates dents
business investment and productivity growth.
Biden’s policies will result in substantiallylarger federal budget deficits than Trump’s,
particularly during their terms as president.
Biden’s policies cost $2.5 trillion during histime as president on a static basis, while
Trump’s add only a few hundred billion dol-

The Macroeconomic Consequences: Trump vs. Bidenlars. Their policies add a similar amount to
the nation’s deficits in the out-years—after
their presidencies—of the 10-year budget
horizon, with a total static cost of less than
$1 trillion. Biden’s spending proposals are
front-loaded, particularly on infrastructure,
and wind down soon after the economy
returns to full employment. In the case of
Trump, there is a burst of infrastructure
spending late in his term, but the bulk of his
tax cuts is back-loaded, occurring in the second half of the decade.
Negative economic fallout from Biden’slarger near-term deficits is mitigated significantly. The reason: With the economy far fromfull employment and inflation moribund when
Biden takes office, the Federal Reserve’s vows8

Chart 2: Real GDP Under Different Election Scenarios
Real GDP, 2012$ bil
22,000

Republican Sweep
Current Policy
Democratic Sweep
Baseline

21,00020,00019,00018,00017,000

19

20

21

22

23

24

Sources: BEA, Moody’s Analytics
September 2020

Chart 3: Jobs Under Different Election Scenarios

2

Nonfarm employment, mil
160
155
150
145

Republican Sweep
Current Policy
Democratic Sweep
Baseline

140
135
130

19

20

21

22

23

24

Sources: BEA, Moody’s Analytics
September 2020

on employment and inflation mean it will keepinterest rates very low for much of the next

MOODY’S ANALYTICS

3

presidential term. Higher interest rates are theprincipal channel through which deficits weigh

The Macroeconomic Consequences: Trump vs. Bidenon economic growth. Moreover, the stronger economic growth supported by Biden’s
policies generates more tax revenue and lessgovernment spending. The results are dynamic
budget costs of closer to $2 trillion during his
term. The stronger growth and increase in
GDP also mean that by the end of the decade,
Biden’s and Trump’s policies result in a similar
130% publicly traded federal government
debt-to-GDP ratio. This compares with 108%
when they take office.
Lower- and middle-income households
benefit more from Biden’s policies than
Trump’s. Biden ramps up government
spending on education, healthcare andother social programs, the benefits of whichlargely go to those in the bottom half of theincome distribution. Meanwhile, he meaningfully increases taxes on the well-to-do,financial institutions and businesses to help
pay for it. Trump largely does the reverse.
He makes permanent the temporary tax
cuts he implemented in his first term. The
benefits largely go to higher-income households and businesses, while government
spending is scaled back on healthcare anda range of social programs, the benefits ofwhich go mainly to those with lesser incomes and wealth.
Voters have a very clear choice in deciding
their next president. Trump and Biden could
not have more different governing approaches and policies, and this is especially true
when it comes to economic policy.

9Appendix: Biden’s Fiscal Policies in DetailVice President Biden has proposed a wide
range of changes to the tax code and government spending. In total, he is calling for $4.1
trillion in tax increases and an additional $7.3
trillion in government spending over the next
decade. The government’s deficits will be$3.2 trillion larger on a static basis and $2.6
trillion on a dynamic basis, after accounting
for the benefits to the budget of the stronger
economy resulting from his policies. His tax
and spending proposals are presented in detail in the discussion that follows.

On taxes16
Biden plans to increase taxes paid bycorporations and high-income and wealthytaxpayers (see Table 1). Lower- and middle-income households, including those in all but
the top quintile of the income distribution, are
not materially impacted by the tax increases.
These groups will bear some modest incidenceof the higher corporate income taxes, but thiswill be more-or-less washed out by the various
tax breaks in Biden’s plan. Together, Biden’s tax
proposals would raise substantial revenue andmake the tax system more progressive.
The largest source of new tax revenue inthe vice president’s plan comes from increasing taxes on corporations. Of the $4.1 trillion
in total tax revenue collected under his planover the next decade on a static basis, morethan half comes from higher corporate taxes.
The bulk of this results from an increase from
21% to 28% in the top marginal tax rate paidby corporations. This hike would partiallyreverse the reduction in the corporate tax
rate from 35% to 21% that President Trump
implemented as part of the Tax Cuts and Jobs
Act passed at the end of 2017. Biden would
also impose a minimum 15% tax on companies’ book income, increase the minimum
tax on profits earned by foreign subsidiaries
of U.S. firms, and scale back tax subsidies
for the commercial real estate and fossil fuelindustries. The vice president proposes some
tax breaks, including his “Made in America”
tax credit to incent companies to move theiroperations to the U.S., more low-income
housing tax credits, and various tax credits
to encourage green investment and help distressed manufacturing communities.
Another large source of new tax revenue in
Biden’s plan is the 12.6% Social Security payroll
MOODY’S ANALYTICS

tax on annual earnings of more than $400,000.
The current earnings cap subject to the payroll tax is almost $138,000. Because of thepersistent skewing of the income distribution
over the past several decades, the amount of
earnings subject to the payroll tax has steadily
declined. Biden’s proposal would address this.
Because the earnings cap increases every yearby the rise in national wages, the cap will eventually climb to $400,000 and the payroll tax
will apply to all earnings. This change will put
the Social Security trust fund on much sounderfinancial footing, and it will raise close to $1
trillion in revenue over the next decade on a
static basis, about one-third of the total tax
revenue raised under Biden’s plan.
The remaining tax revenue raised under
Biden’s plan comes from high-income households. The vice president would roll backthe tax cuts that those earning more than$400,000 received under Trump’s TCJA, tax
capital gains and dividend income like ordinary
income for those making more than $1 million
in total income, tax unrealized capital gains atdeath, and limit the use of itemized deductions.
Biden provides a range of individual tax breaks
to incent better environmental practices, including clean cars and more efficient homes
and appliances, and to help student loan borrowers and increase retirement savings.

On government spending17
Biden plans to substantially increase government spending, using the additional tax
revenues he raises to help defray some of thecosts. His proposal calls for additional spending of $7.9 trillion on a static basis, including
on infrastructure, education, the social safety
net, and healthcare, with the bulk of the
spending slated to happen during his term aspresident in an effort to generate more jobs
to return the economy to full employment as
quickly as possible.
Of all of Biden’s spending initiatives, themost expansive is on infrastructure. On astatic basis, he would increase such spendingby $2.4 trillion for the decade—all of it tobe spent during his term (see Table 2). This
includes increases for traditional transportation infrastructure, clean energy investments,
R&D and innovation, and “Made in America”
government purchases of American-madeproducts. There would also be additional

The Macroeconomic Consequences: Trump vs. Bidenmonies for social infrastructure, including
affordable housing, public schools, community colleges, historically black colleges anduniversities, and rural broadband.
Biden is also calling for a large increase in
an array of educational initiatives. He proposesto spend $1.9 trillion over 10 years on a static
basis on pre-K, K-12 and higher education (seeTable 3). Attending a public college or university would be tuition-free for children in families with incomes of less than $125,000. All
student loan borrowers would benefit from asignificant expansion of existing income-based
repayment programs. Biden also proposes
universal pre-K for 3- and 4-year-olds, andsubstantially more Title 1 funding to pay publicschool teachers more competitively.
The social safety net would meaningfully
expand under Biden (see Table 4). He would
spend an additional $1.5 trillion over 10 years
on a static basis on various social programs,with the largest outlays going to workers toreceive paid family and medical leave for up
to 12 weeks.18 This benefit would be worth
at least two-thirds of workers’ wages up to aceiling. Biden would also help pay for eldercare, allowing families more choice to provide necessary care at home or in supportive
community situations. Social Security benefits would increase for widowers and theoldest Americans, and money would go tohelp expand short-term compensation, also
known as Work Share, in the unemployment
insurance program.
The healthcare system would also receive
a significant infusion of funding under a
President Biden primarily via the Affordable
Care Act (see Table 5). The ACA would havethe wherewithal to raise subsidies to increaseenrollment, automatically enroll low-income
individuals into premium-free coverage,
and to establish a new public option, which
received considerable attention during the
Democratic primaries. Healthcare spending
would also increase to address the opioid
crisis and rural health issues. Some of theseadded costs would be paid via lower prescription drug prices—Medicare would be permitted to negotiate prices, and importation ofcheaper drugs from overseas would be permitted. The 10-year static budget cost of the
proposed changes to the healthcare systemcomes to nearly $1.5 trillion.
10

Table 1: Static Budget Score of Biden’s Tax Plan
Static effect on federal tax revenue, $ bil
Cumulative2021-2024
2020-2030
Total tax revenue

1,441.7

4,099.2

Individual income taxes
Tax capital gains and dividends at same rate as ordinary income above $1 million of income and tax unrealized capital gains at death
Limit tax benefit of itemized deductions to 28% of value
Tax compliance investments and sanctions
Restore the estate, gift, and generation-skipping transfer (GST) tax parameters in effect in 2009
Phase out qualified business income deduction above $400,000 of income
Restore pre-TCJA rates above $400,000 of income
Restore limitations on itemized deductions above $400,000 of income
First Down Payment Tax Credit
Clean Cars for America Rebates
Make the child tax credit and dependent care tax credit fully refundable for 2021 and increase their generosity
Provide a tax credit for family caregivers of individuals with physical and cognitive needs
Replace the deductibility of worker IRA/DC pension contributions with 26% refundable tax credit
Tax credit of up to a total of $8,000 to low- to middle-income families to help pay for child care
New renter’s tax credit to reduce rent and utilities to 30% of income for low-income households who may not qualify for Section 8 vouchers
Restore the full electric vehicle tax credit and target it to middle-income consumers
Establish automatic IRAs and a small business start-up credit for offering retirement plans
Consumer appliance rebates
Reinstate tax credits for residential energy efficiency
Make permanent the New Markets Tax Credit
Extend EITC to childless workers age 65 and older
Exempt forgiven student loans from taxable income

302.6
149.3
56.4
60.0
94.0
164.2
109.9
52.6
-54.2
-58.6
-122.2
-29.8
-47.7
-16.2
-20.0
-8.6
-6.6
-9.5
-7.4
-1.6
-1.2
-0.1

963.1
462.2
310.2
300.0
266.7
218.6
143.3
69.9
-153.7-145.0-124.7
-99.5
-54.3
-53.6
-50.0
-30.0
-26.8
-25.0
-25.0
-11.9
-4.2
-4.0

Payroll taxes
Apply 12.4% Old-Age, Survivors, and Disability Insurance payroll tax to earnings above $400,000

317.2
317.2

997.6
997.6

Corporate income taxes
Increase corporate income tax rate to 28%
Reduce the global intangible low-tax income deduction from 50% to 25%
Eliminate certain tax preferences for the real estate industry
Impose 15% minimum tax on global book income
Impose a financial fee
Eliminate tax preferences for fossil fuels
End tax deduction for direct-to-consumer prescription drug advertising
Tighten the rules for classifying independent contractors
Power generation and storage credits
Restore the energy investment tax credit and make permanent
Low-Income Housing Tax Credit
Enact Senator Jeff Merkley’s Good Jobs for 21st Century Energy Act
Provide a tax credit for carbon dioxide investment and sequestration
Provide a tax credit for distressed manufacturing communities
Provide “Made in America” tax credit and remove tax deductions for shipping jobs overseas

822.0
444.9
182.2
100.0
54.9
39.6
11.2
5.5
4.1
-5.7
-10.0
-1.2
-0.6
-2.4
-0.4
-0.1

2,138.5
1,341.0
314.3
303.6
174.6
111.4
20.3
15.8
14.7
-100.0
-25.8
-10.8
-10.0
-7.8
-2.6
-0.2

Sources: Biden Campaign, JCT, Tax Policy Center, Treasury, Moody’s Analytics

MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

11

Table 2: Static Budget Score of Biden’s Infrastructure Plan
Static effect on federal budget deficit, $ bil
Cumulative2021-2024
2021-2030
Total infrastructure

2,338.4

2,390.0

Transportation infrastructure
Kick-start repair of highways, bridges and roads
Transformational Projects Program
Increase Army Corps of Engineers funding
Roughly double funding for key competitive grant programs
Transit projects for low-income areas with limited transportation options
Other

872.4
50.0
40.0
8.8
5.7
10.0
758.0

900.0
50.0
40.0
25.0
17.0
10.0
758.0

“Made in America”
Federal procurement of an array of products made by American workers from clean vehicles to steel and critical medical supplies
R&D funding directed to 5G, artificial intelligence, biotechnology, and clean energy, among others

700.0
400.0
300.0

700.0
400.0
300.0

Clean energy
Conservation, remediation and resilience
Fossil Legacy Reclamation
Power transmission support
Environmental Justice Fund
Water infrastructure
Clean Energy Standard Block Grants
Manufacturing retooling and retrofits
Deploy 500,000 new public charging outlets by end of 2030
Energy transition package
Transform local transportation funding to be more sustainable
HUD-DOE weatherization assistance
Energy Efficiency and Conservation Block Grants
RUS funding related to fossil generation
Other

472.8
85.0
50.0
50.0
50.0
50.0
40.0
35.0
7.8
25.0
15.0
15.0
15.0
10.0
25.0

490.0
85.0
50.0
50.0
50.0
50.0
40.0
35.0
25.0
25.0
15.0
15.0
15.0
10.0
25.0

Other structures
Modernize public school facilities
Affordable Housing Fund
Investments in facilities and technology at community colleges, HBCUs, TCUs and MSIs
Rural broadband infrastructure
Pass the Ending Homelessness Act to invest in housing units for the homelessCities Revitalization Fund
Expand flexible funding for the Community Development Block Grant
Other

293.1
100.0
100.0
38.0
20.0
13.0
10.0
3.1
9.0

300.0
100.0
100.0
38.0
20.0
13.0
10.0
10.0
9.0

Sources: Biden Campaign, Moody’s Analytics

MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

12

Table 3: Static Budget Score of Biden’s Education Plan
Static effect on federal budget deficit, $ bil
Cumulative2021-2024
2021-2030
Total education

636.3

1,906.4

K-12 funding
Triple Title I funding for public schools
Provide universal pre-kindergarten to all 3- and 4-yr-olds
Allow teachers to mentor other teachers while being compensated for the extra work
Roughly triple federal funding to public schools for children with disabilities

159.7
72.1
25.9
35.6
26.1

600.0
250.0
150.0
100.0
100.0

Higher education
Make public colleges and universities tuition-free for all families with incomes below $125,000
Double the maximum value of Pell grants
Workforce training, including community-college apprenticeships
Increase affordability, enrollment, completion and career-building at HBCUs, TCUs and MSIs

366.9
191.3
146.4
15.7
13.5

1,006.5
522.9
393.1
50.0
40.5

Student loan debt
Simplify and increase generosity of the income-based repayment program
New Public Service Loan Forgiveness Program offering $10,000 of undergrad or grad student loan debt relief for every yr of service up to 5 yrs

109.8
104.1
5.6

299.9
284.6
15.3

Sources: Biden Campaign, CBO, CRFB, Georgetown Univ. Center on Education and the Workforce, NCES, Urban Institute, Moody’s Analytics

Table 4: Static Budget Score of Biden Social Safety Net Plan
Static effect on federal budget deficit, $ bil
Cumulative2021-2024
2021-2030
Total social safety net

367.8

1,498.5

Elder and child care
Create a national paid family and medical leave program to give all workers up to 12 wks of paid leave
Give Americans more choice to receive care at home or in supportive community situations
Cash assistance grants to survivors of sexual or domestic violence who need to pay for day care and transportation, among others

256.5
114.5
140.4
1.6

1,025.0
570.0
450.0
5.0

Social Security
Compute the COLA using the Consumer Price Index for the Elderly (CPI-E) rather than the CPI
Protect widowers from steep benefit cutsHigher benefit for oldest Americans
Minimum benefit for lifelong workers

63.4
10.4
32.7
18.1
2.3

328.6
120.5
109.5
68.7
29.9

Labor
Enact the Paycheck Fairness Act
Make short-term compensation, also known as work-sharing, 100% federally funded and secure participation of all 50 U.S. states, DC,
and territories

47.8
42.5

144.9
136.3

5.3

8.7

Sources: Biden Campaign, CBO, Department of Labor, Social Security Administration, Moody’s Analytics

MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

13

Table 5: Static Budget Score of Biden’s Healthcare Plan
Static effect on federal budget deficit, $ bil
Cumulative2021-2024
2021-2030
Total healthcare

605.1

1,475.0

Health spending
Build on Affordable Care Act, establish a new public insurance option, and automatically enroll low-income individuals into premium-free coverage
Lower the Medicare eligibility age from 65 to 60 yrs old
Boost rural health and mental health funding
Address the opioid crisis through flexible grants to states and localities for prevention, treatment and recovery efforts, among others

727.5
613.3
74.3
40.1
39.3

1,825.0
1,700.0
200.0
200.0
125.0

Cost-cutting health reforms and programmatic revenue effects
Allow Medicare to negotiate drug prices directly and limit launch prices for drugs facing no competition
Coverage expansion revenue feedback
Limit price increases for certain drugs to the rate of inflation and allow purchase of prescription drugs from other countries, among others
End surprise medical billing

122.4
-20.3
-108.2
-19.2
-14.2

350.0
-300.0-300.0-100.0-50.0

Sources: Biden Campaign, CBO, CRFB, Moody’s Analytics

MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

14

Appendix: Trump’s Fiscal Policies in Detail
The Trump campaign has released thepresident’s policy agenda for a second term,
but it is lacking in details regarding its economic priorities. Therefore, to assess President Trump’s economic plan we relied on thepresident’s speeches and statements and thefiscal proposals contained in his fiscal 2021
budget. We surmise his economic plan would
include $1.9 trillion in tax cuts and more than$700 billion in government spending reductions over the next decade. The government’s
deficits will be larger by $1.2 trillion on a
static basis and $1 trillion on a dynamic basis
after accounting for the benefits to the budget of the stronger economy resulting fromhis policies. His tax and spending proposals
are presented in detail in the discussionthat follows.

On taxes19
Trump would substantially cut taxes overthe next decade (see Table 1). The largest
source of tax cuts comes from permanently
extending the individual income tax provisions of the 2017 Tax Cuts and Jobs Act,
which are set to expire after 2025 undercurrent law. These include lower individual
income tax rates, an expanded child tax
credit, less income subject to the alternative
minimum tax, and increased estate and gift
tax exemptions. The principal beneficiaries ofthe president’s tax cuts would be householdswith higher incomes and net worth.
The Trump administration has long supported indexing capital gains to inflation, andwe assume he implements this tax cut in his
second term. Capital gains taxes are assessedon the difference between the sale price ofan asset and its original purchase price. Thisdifference is measured in nominal terms.
However, if the initial value of the asset wereallowed to be adjusted for inflation, it would
reduce the taxable gain of the asset.
The president has also long advocated for
reducing payroll taxes. Indeed, he signed an
executive order this summer to temporarilydefer employee-side Social Security taxes forworkers below an annual $100,000 income
threshold through the end of the year. How-MOODY’S ANALYTICS

ever, eligible taxpayers would still be on thehook to repay the deferred payroll taxes in
2021, which would create numerous headaches for payroll departments. Therefore, few
employers will stop withholding and submitting payroll taxes owed by their employees,
rendering this executive action largely ineffective. But given the president’s long-standing support for such a tax cut, we assume
Trump would enact a payroll tax holiday earlyin his second term.
The president has proposed several otherchanges to the personal tax code that weassume he would implement. These include
establishing a federal tax credit for voluntary
donations to state-based scholarship programs, allowing Medicare beneficiaries withhigh-deductible health plans to make tax-deductible contributions to health savings
accounts or medical savings accounts, andrepealing specific energy-related tax credits.
On corporate taxes, the president would
extend immediate expensing of capital outlays at a 100% rate. Under current law, theportion of business investment in equipment
and certain other assets that can be expensed
is 100% through 2022, 80% in 2023, 60% in
2024, 40% in 2025, and 20% in 2026, after
which the provision expires. He would provide “Made in America” tax credits to incent
insourcing of jobs to America. Toward thatsame aim, he would establish tax credits forcompanies that bring jobs back from China
and allow businesses in essential industries todeduct 100% of certain expenses if they bring
their manufacturing back to the U.S.

On government spending20
Trump has proposed cuts in government
spending to partially offset the revenue losses
under his tax plan (see Table 2). Healthcare
would bear the brunt of his spending cuts. He
would reduce Medicare payments for graduate medical education, uncompensated care,bad debts, post-acute care providers, hospicecare, and hospital-owned physician offices.
In addition, he would derive Medicaid savingsby continuing Disproportionate Share Hospital allotment reductions and implementing

The Macroeconomic Consequences: Trump vs. Biden

self-sufficiency and work requirements.
Reforms to drug pricing and medical malpractice would also be on the table.
The social safety net would face significant cuts as well. The president would reduce
welfare spending, especially for the Supplemental Nutrition Assistance Program andTemporary Assistance for Needy Families.
Federal disability programs would be overhauled, and the administration would crack
down on Social Security payment integrity.
Finally, Trump would target a reduction in
health and retirement benefits for federal
government employees.
Student loan programs would becomeless generous under Trump’s economic plan.
He would replace existing income-based
student loan repayment plans with a single
one that caps monthly payments at 12.5%of discretionary income. He would eliminate
subsidized student loans and the Public Service Loan Forgiveness program.
Not all of Trump’s plan consists of spending cuts. He has also called for a 10-year
reauthorization of surface transportation
programs of more than $800 billion and additional investments of $190 billion on water
infrastructure and broadband, among others.
Infrastructure spending under the Trumpeconomic plan would peak in the middleof the decade. He would also provide $166
billion in defense funding to support the Pentagon’s National Defense Strategy. Finally, hewould allocate smaller amounts of funding
for paid parental leave, the opioids crisis, andmental health.
The president’s budget includes a few major proposals that we did not include in our
analysis. For example, he calls for significant
cutbacks in nondefense discretionary spending. Even if Republicans were to sweep theHouse, Senate and White House on Election
Day, the annual appropriations process will
still be a largely bipartisan exercise, and Democrats would never allow such nondefense
spending cuts to occur. The president’s budget also includes his “health reform vision,”but a lack of details kept us from including itin our analysis.

15

Table 1: Static Budget Score of Trump’s Tax Plan
Static effect on federal tax revenue, $ bil
Cumulative2021-2024
2020-2030
Total tax revenue-310.1-1,890.3

Individual income taxes
Permanently extend provisions of the 2017 tax law that lowered the tax burden for individual taxpayers
Index capital gains to inflation
Establish Education Freedom Scholarships, which creates an annual federal tax credit for voluntary donations to state-based scholarshipprograms
Give Medicare beneficiaries with high deductible health plans the option to make tax deductible contributions to HSAs or MSAs
Improve tax administration
Repeal specific energy-related tax credits-103.1-20.0-80.0-1,517.6-1,353.6-200.0

-16.0

-45.8

-4.7
11.7
5.9

-16.3
81.6
16.5

Payroll taxes
Suspend employee-side 6.2% Social Security payroll tax for first four mo of 2021

-172.2-172.2-172.2-172.2

Corporate income taxes
Extend partial expensing of equipment property at 100% rate
Provide “Made in America” tax credit and remove tax deductions for shipping jobs overseas

-34.8
-34.8
-0.1

-200.5-200.2-0.2

Sources: CBO, OMB, Social Security Administration, Tax Policy Center, Treasury, Moody’s Analytics

MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

16

Table 2: Static Budget Score of Trump’s Spending Plan
Static effect on federal budget deficit, $ bil
Cumulative2021-2024
2021-2030
Total spending

23.9-737.1

Infrastructure
10-yr reauthorization of surface transportation programs
Additional infrastructure investments
Federal Capital Revolving Fund

394.1
273.9
113.2
6.9

1,084.0
885.0
190.0
9.0

Healthcare
Reduce Medicare payments for uncompensated care, post-acute care, hospice care, and hospital-owned physician offices, among others
Implement Medicaid community engagement requirement
Enact comprehensive drug pricing reform
Other Medicaid savings
End surprise medical billing
Enact medical malpractice reform
Enable CMS to recoup improper payments and continue Medicaid Disproportionate Share Hospital allotment reductions
Address opioids and mental health-217.8-107.8
-48.7
-26.2
-16.4
-14.2
-5.4
-1.6
2.5

-928.4-464.8-152.4-135.0
-55.1
-50.0
-40.3
-37.8
7.0

Social safety net
Reduce welfare spending particularly on SNAP and TANF
Modify government contribution rates to federal health benefit programs and reduce retirement benefits for federal employees
Overhaul federal disability programs and improve Social Security payment integrity
Implement agricultural program reforms
Provide paid parental leave-138.7-105.7
-15.3
-7.0
-17.6
6.9

-485.0-292.1
-89.0
-76.0
-56.0
28.1

Education
Create single income-driven student loan repayment plan
Eliminate Public Service Loan ForgivenessEliminate standard repayment cap
Eliminate subsidized student loans
Use combined AGI to calculate loan payments for married filing separately
Other

-52.2
-18.2
-15.6
-10.0
-5.6
-1.5
-1.2

-170.0
-59.8
-52.2
-27.6
-18.3
-4.9
-7.2

Other
Provide defense funding to support the National Defense Strategy
Other spending reductions, reforms, or adjustments

38.4
127.1
-88.6

-237.7166.0-403.7

Sources: CRFB, OMB, Moody’s Analytics

MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

17

Endnotes
1 Moody’s Analytics provides economic analysis and does not endorse or support any political party or candidate, including those in the 2020 U.S. presidential election.
This paper is part of the ongoing analysis by Moody’s Analytics of the economic implications of the candidates’ policy proposals in the election. Moody’s Analytics has
published a series of reports throughout the election cycle analysing the candidates’ proposed tax and economic plans.
2 The authors have not made contributions to either presidential candidate during this election cycle. Mark Zandi previously served as an economic advisor to the 2008
John McCain presidential campaign.
3 This is the Moody’s Analytics August 2020 baseline. The likelihood of these scenarios is based on current poll results and our model of the presidential
election outcome.
4 In the Democratic Sweep and Republican Sweep Scenarios we effectively assume the Senate does away with the filibuster rule to allow for full adoption of Biden’s andTrump’s policies, respectively. This further reduces the odds that these scenarios will actually occur, but they bookend the possible economic outlooks due to policychanges resulting from the outcome of the election.
5 Moody’s Analytics, a unit of Moody’s Corp., provides economic analysis to market participants to help them measure and manage risk. It operates independently of
Moody’s Investors Service, the credit ratings agency.
6 A detailed description of the Moody’s Analytics model of the U.S. economy is available here. More detailed validation documentation is available on request.
7 See “The Macroeconomic Consequences of Mr. Trump’s Economic Policies,” Mark Zandi, Chris Lafakis, Dan White and Adam Ozimek, Moody’s Analytics white paper,
June 2016. And see “The Macroeconomic Consequences of Secretary Clinton’s Economic Policies,” Mark Zandi, Chris Lafakis and Adam Ozimek, Moody’s Analytics
white paper, July 2016.
8 See “Death, Taxes and Regulation?” Mitch Murphy, Mark Zandi and Dante DeAntonio, Moody’s Analytics white paper, August 2018.
9 This is a tenuous assumption given prospects that the virus will intensify as the weather gets cooler and people move indoors where transmission is easier. If there is aserious second wave, the outlook and policy response could change significantly.
10 The static budget cost of a tax or government spending policy does not account for the impact of that policy on economic growth and the resulting impact on the costof that policy. The dynamic budget cost does account for this.
11 Biden has called for a $15 minimum wage, although he does not specify over what period of time it would be implemented. However, we assume that the federal
minimum wage is raised incrementally over six years until it reaches $15 in 2027. This assumption is based from the Raise the Wage Act of 2019 passed last year by
House Democrats.
12 Hysteresis is a reduction in the economy’s potential due to a significant economic shock such as a pandemic, which causes a large number of business failures andbankruptcies, permanent job loss, credit problems, and reduced mobility of labor and capital. Once hysteresis sets in, it is difficult to reverse. Hysteresis effects are built
into the Moody’s Analytics macro model.
13 The Trump administration has consistently argued that the U.S. economy will rebound quickly from the pandemic, fully recovering in just a few months. That is, it will
experience a V-shape recovery.
14 According to an analysis by the CBO of the last major legislative attempt at immigration reform in 2013, “immigration of highly skilled immigrants would tend to generate additional technological advancements, such as new inventions and improvements in production processes.”
15 Under current Senate rules, budget reconciliation allows for tax and government policies that are budget neutral over the 10-year budget horizon.
16 Our analysis of Biden’s tax proposals relies significantly on analysis by the Tax Policy Center.
17 Our analysis of Biden’s spending proposals relies significantly on analysis by the Committee for a Responsible Federal Budget.
18 Similar to the FAMILY Act sponsored by Senator Kirsten Gillibrand (D-NY). Unlike the FAMILY Act, however, Biden does not support an across-the-board payroll tax
increase to pay for the plan (nor an employer mandate) and instead would pay for it with a portion of the proposed taxes on the wealthy.
19 Our analysis of Trump’s tax proposals leans heavily on alternative budget forecasts from the Congressional Budget Office, analysis by the Tax Policy Center, andTrump’s fiscal 2021 budget.
20 Our assumptions for Trump’s spending plan rely significantly on his fiscal 2021 budget proposals.

MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

18

About the Authors
Mark Zandi is chief economist of Moody’s Analytics, where he directs economic research. Moody’s Analytics, a subsidiary of Moody’s Corp., is a leading provider of economic research, data and analytical tools. Dr. Zandi is a cofounder of Economy.com, which Moody’s purchased in 2005.
Dr. Zandi’s broad research interests encompass macroeconomics, financial markets and public policy. His recent research has focused on mortgage finance reform and thedeterminants of mortgage foreclosure and personal bankruptcy. He has analyzed the economic impact of various tax and government spending policies and assessed theappropriate monetary policy response to bubbles in asset markets.
A trusted adviser to policymakers and an influential source of economic analysis for businesses, journalists and the public, Dr. Zandi frequently testifies before Congress on
topics including the economic outlook, the nation’s daunting fiscal challenges, the merits of fiscal stimulus, financial regulatory reform, and foreclosure mitigation.
Dr. Zandi conducts regular briefings on the economy for corporate boards, trade associations and policymakers at all levels. He is on the board of directors of MGIC, thenation’s largest private mortgage insurance company, and The Reinvestment Fund, a large CDFI that makes investments in disadvantaged neighborhoods. He is often
quoted in national and global publications and interviewed by major news media outlets, and is a frequent guest on CNBC, NPR, Meet the Press, CNN, and various othernational networks and news programs.
Dr. Zandi is the author of Paying the Price: Ending the Great Recession and Beginning a New American Century, which provides an assessment of the monetary and fiscal policy response to the Great Recession. His other book, Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis, is describedby The New York Times as the “clearest guide” to the financial crisis.
Dr. Zandi earned his BS from the Wharton School at the University of Pennsylvania and his PhD at the University of Pennsylvania. He lives with his wife and three children
in the suburbs of Philadelphia.
Bernard Yaros is an assistant director and economist at Moody’s Analytics focused primarily on federal fiscal policy. He is responsible for maintaining the Moody’s Analytics
forecast models for federal government fiscal conditions and the 2020 presidential election, as well as providing real-time economic analysis on fiscal policy developments
coming out of Capitol Hill.
Besides fiscal policy, Bernard covers the District of Columbia and Puerto Rico and develops forecasts for Switzerland. He regularly advises clients and policymakers of alllevels on the Puerto Rico economic outlook after Hurricane Maria. He has been featured in a number of print media outlets from Bloomberg to Bond Buyer for his work on
Switzerland and Puerto Rico.
His most recent research has ranged from U.S. fiscal multipliers to the regional impacts of the 2018-2019 government shutdown and federal disaster relief in Puerto Rico.
Bernard has performed research on other subjects including stress-testing U.S. state budgets and forecasting the 2018 midterms.
Bernard holds an MSc in international trade, finance and development from the Barcelona Graduate School of Economics and a BA in political economy from Williams College.

MOODY’S ANALYTICSThe Macroeconomic Consequences: Trump vs. Biden

19

About Moody’s Analytics
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